SALV.L Regulatory News (SALV)

SalvaRx Group plc

("SalvaRx", "the Company" or "the Group")

Final Results

Chairman's Statement

I am pleased to present the audited final results for SalvaRx. As a reminder, in March 2016, SalvaRx Limited became a wholly owned subsidiary of 3Legs via a reverse takeover ("RTO"), as part of our plan to create a multi-product drug development portfolio company focused on cancer immunotherapy. 3Legs also changed its name to SalvaRx Group plc ("SalvaRx") and was re-admitted to trading on the Alternative Investment Market ("AIM") of the London Stock Exchange (AIM: SALV), on 22 March 2016. Since then, the team has executed upon its strategy to grow a pipeline of novel treatments for cancer.

The cancer immunotherapy market continues to be a rapidly growing therapeutic area. As of today, there are five approved anti-PD1 agents in the United States. This is the first time in the oncology field where five of the large cap pharma companies (Pfizer, Merck, BMS, Astra Zeneca, and Roche) are competing with similar drugs. Given the lack of differentiation, each company is striving to create novel combinations with second agents to compete with one another. BMS is in the lead in this area with their proprietary combination of Opdivo and Yervoy. Collectively, large cap pharma companies are running hundreds of other studies looking at combinations of new agents with their PD1 products. Former BMS executives created SalvaRx with a specific strategy to develop state of the art combination agents for these PD1 products and to seek exits with these pharma companies early on.

Since the RTO, SalvaRx has continued delivering its mission by advancing its products into the clinic and acquiring exciting additional products in the immunotherapy sector. The Group has reviewed hundreds of opportunities, and has now invested in four exciting platform companies where it is actively helping drive strategy and execution. As of the publishing of this report, SalvaRx portfolio companies have a total of eight products in development with one in the clinic. This is truly remarkable given the total capital invested and reflects creative deal making and strong utilisation of non-dilutive capital.

The loss for the year ended 31 December 2016 was £2,445,000 (2015: £466,000). This reflects continued investment in research and development of £693,000 (2015: £260,000) and exceptional costs related to the RTO of £871,000.

Since the year end, the Company has raised $3m in the form of loan notes, of which $2m has come from Greg Bailey and myself. This additional funding will help us to support our current business and add selectively to our portfolio when we identify the right opportunities. It is our intention to provide further financial support if required.

I am encouraged by the progress that has been made and am confident that further advances will be made in the current financial year. It will be quite exciting to track the performance of our treatments in advanced cancer patients. By this time next year, many more patients will be given new options to help combat their disease. The SalvaRx team continues to innovate and seek out the world's best technologies to bring to cancer patients.

Jim Mellon

Non-executive Chairman

29 June 2017

Enquiries

CEO's Strategic Report

In its second year of operations, SalvaRx has continued to execute on its strategy to grow its pipeline of products and help develop innovative medicines for the treatment of cancer. This report covers activity both during the period under review and post period end and highlights our ability to advance drugs through the development and regulatory process to begin testing on humans. Ultimately our goal is to help as many cancer patients as possible with our medicines, and we have been able to grow our innovative pipeline to eight products. We are continuing to review new opportunities as well as interfacing with big pharma companies to discuss possible strategic collaborations.

iOx Therapeutics (60.49% subsidiary undertaking)

iOx has been progressing its two products through preclinical development and manufacturing. Although there have been some challenges with the manufacturing process for lead product IMM60, the management team and its expert advisers have resolved the issues and iOx is now progressing to large scale manufacturing for clinical trial use. There are many activities going on in parallel to enable the first human patient to be treated in the near future.

In parallel, the PRECIOUS team, a consortium of academic experts from five leading European universities, continues to make progress in the development of our second product, IMM65, a combination of IMM60 with a tumor vaccine (NY-ESO1). These development activities are fully funded through a Horizon 2020 grant with the result being that there is scope to make significant progress with no cost to iOx. We announced in August 2016 that The Ludwig Institute has granted iOx the rights to use their NY-ESO1 cancer vaccine on a commercial scale, if the grant-funded clinical trial proves the efficacy of the new combination product.

iOx continues to prosecute and progress its patent applications and in 2016, a US patent was issued for its lead program. Under US Patent Number 9,365,496, IMM60 is covered as a standalone treatment, along with additional uses in a co-formulation with a tumour vaccine or given as a combination therapy alongside an immunomodulatory agent, including PD-1 pathway inhibitors. PD-1 drugs were part of the new vanguard of cancer therapies, allowing the human immune system to fight cancer, instead of traditional chemical treatments, and there are now five approved anti-PD1 therapies. iOx's clinical programs all explore their iNKT technology alone and in combination with an anti-PD1 agent. It is our goal to improve the anti-tumor immune response by targeting many components of the immune system.

Intensity Therapeutics ($2million investment, representing 8.5% equity)

Intensity has been releasing data over the past year at multiple international congresses along with its partners at the National Cancer Institute (a division of the National Institutes of Health). Most importantly, the company submitted an application to begin testing its lead product INT230-6 in cancer patients in both United States and Canada. Intensity announced on 30 May 2017 that it has started to treat its first patient in the clinical trial. This is an exciting milestone which represents the positive assessment by the FDA of results of the trials carried out on animals and the related safety procedures, and validates the integrity of Intensity's manufacturing procedures.

New Activities in 2017

In order to continue executing our plans to invest and operate other exciting opportunities in immunotherapy, in March 2017 SalvaRx Limited announced the issue of a debt instrument for up to $5million. To date approximately $3million has been raised, and I am delighted to report the continuing support of two of our directors, Greg Bailey and Jim Mellon, who have each subscribed for $1million. In addition, the Company effected a reorganization whereby all its interests were integrated under SalvaRx Limited, and it is anticipated that this structure will open additional avenues for fundraising in the future. The new investment into the Company has already enabled SalvaRx Limited to complete two new investments, namely Nekonal Oncology and Rift Biotherapeutics.

Nekonal Oncology

In February 2017, we announced a joint investment with Nekonal SARL, called Nekonal Oncology. Nekonal was founded by a former Harvard professor Nalân Utku, MD who was exploring a unique antibody for autoimmune diseases. Later she discovered that the opposite antibody held promise for use in oncology indications. SalvaRx scientific and business leadership has joined forces with Dr. Utku to start Nekonal Oncology with a licence to two oncology antibodies. Nekonal was able to recruit a very senior biotech executive, John Edwards, chairman of two other cancer immunotherapy companies to join the board of Nekonal Oncology.

Rift Biotherapeutics

We advanced to Rift Biotherapeutics Inc. ("Rift") by way of convertible notes total amount of $90,000 between December 2016 and January 2017 and further invested $1million in March 2017 for an initial holding of approximately 30% in Rift. Rift has a lab in San Diego California, and has brought the SalvaRx portfolio new capabilities in antibody engineering. Its management team has been strengthened by the appointment of Briggs Morrison, MD to the board. Briggs is the CEO of Syndax (NASDAQ: SNDX) and a managing director of MPM Capital, a healthcare-focused venture capital firm and previously held senior positions at AstraZeneca, Pfizer's and Merck. Rift develops novel antibodies which modulate numerous suppressive factors that exist in the tumor microenvironment. There is some synergy and possibility for collaboration with the Nekonal Oncology team. In addition to the initial equity investment, SalvaRx has the option to invest an additional $1.5million at the same valuation and to acquire all the outstanding shares of Rift for new shares in SalvaRx on the same basis.

Outlook

We expect that our iOx subsidiary and investments will all continue their manufacturing and preclinical testing during the rest of the year. We are anticipating iOx to start new clinical trials in 2018 and we are also expecting preliminary clinical trial data from Intensity's human studies also in 2018. At the SalvaRx corporate level, we continue to identify potential investments or acquisitions. We expect to grow further by acquisition, investment or licensing arrangements as we identify novel cancer immunotherapies.

Our hard work is paying off, as advanced cancer patients can now participate in clinical trials of Intensity's first product (INT230-6). Many people are still suffering with their disease and have limited options for treatment. We are striving to expedite access to our novel medicines by working closely with health authorities and innovating how we prepare products for human testing. We believe that over the next two years SalvaRx will see the rewards of these efforts. Thank you for your continued support as we try to improve the care for people with cancer.

Dr Ian Walters

Chief Executive Officer

29 June 2017

Directors' report

Introduction

The Directors present their report and financial statements of SalvaRx Group PLC ("the Group") for the year ended 31 December 2016.

Principal activity

The Group's principal activity is that of drug discovery and development, focused on immune-oncology.

Business and financial review and future developments

The plans for the future are set out in the Chairman's Statement and CEO's Strategic Report.

Results and dividends

The Group's loss for the year after taxation, net of non-controlling interest was £2.10million (2015: loss of £0.4 million). The Directors do not recommend the payment of a dividend for the year.

Directors

The Directors of the Group that served during the year and subsequently were as follows:

Jim Mellon, Non-Executive Chairman

Dr Ian Walters, Chief Executive Officer (appointed 22 March 2016)

Kam Shah, Chief Financial Officer (appointed 22 March 2016)

Dr Greg Bailey, Non-Executive Director

Richard Armstrong, Non-Executive Director

Colin Weinberg, Non-Executive Director

Biographical details of serving Directors can be found in the Board of Directors section.

Annual General Meeting and re-election of Directors

The Annual General Meeting will be held on 31 July 2017.

Directors' Interests

The table below sets out the Directors interests in the Company's Ordinary Shares, including their connected persons, together with details of options held by the directors over New Ordinary Shares of the Company:  

*iOx Therapeutics Ltd is a subsidiary, in which the Company holds 60.49% equity.

Note: options with an exercise price of 23.2p are exercisable at any time until 16 February 2021. Options with an exercise price of 35.5p are exercisable in three equal annual tranches from 22 March 2017, except such options granted to Richard Armstrong and Colin Weinberg which are exercisable immediately in event that they step down from the Board in due course on the appointment of new non-executive directors.

The interests of Jim Mellon in the table above include Ordinary Shares in the Company held by Port Erin Biopharma Investments Limited and Galloway Limited. Jim Mellon holds controlling interests in these companies.

On 21 April 2016, the Company issued a total of US$1 million of zero coupon Convertible Loan Notes to Jim Mellon and Dr. Greg Bailey. The Loan Notes had a term of three years and were convertible at the Noteholders' discretion at a price of 35.5p per Ordinary share. However, in February 2017, the entire loan note liability was transferred to SalvaRx Limited and the Note holders agreed to accept 4,000 ordinary shares of SalvaRx Limited in full settlement of the Loan Notes.

Directors' insurance and indemnity provisions

Subject to the conditions set out in the Isle of Man Companies Act 2006 and the Company's Articles of Association, the Company has arranged appropriate Directors' insurance to indemnify the Directors against liability in respect of proceedings brought by third parties. The annual cost of the cover is not material to the Group.

Significant shareholders

Other than the Directors' interests shown above, as at 23 June 2017, the Company had been notified that the following were holders of 3% or more of the Company's issued Ordinary Share capital:

Share capital

Details of the issued share capital, together with details of the movement in issued share capital during the year, are shown in note 20 to the financial statements.

Principal risks and uncertainties

The principal risks faced by the Company and the actions taken to mitigate them, are shown in the table below:

Key Performance Indicators

At this stage, the success of the Group is dependent upon the success of future clinical trials. When the outcomes of these trials are known, if and when the Company moves into production, financial, operational, health and safety and environmental KPIs will become relevant and be measured and reported accordingly.

Political donations

There were no political donations made by the Group in the current or prior year.

Charitable donations

There were no charitable donations made by the Group in the current or prior year.

Going concern

The Directors have a reasonable expectation that the Group has adequate resources to continue in existence for the foreseeable future, based on the cash raised subsequent to the year-end. This is expected to meet the next twelve months projections of the operational and research and development activities to be carried out.

At 31 December 2016, the Group had cash and cash equivalents of approximately £1.0 million. Subsequent to the balance sheet date, the Group's subsidiary, SalvaRx Limited raised approximately £2.4 million (US$3 million) through debt financing.

The Board has evaluated the cash flow and proposed budget and has reached the conclusion there is sufficient funding for the current workload projected until June 2018. This budget includes some estimation of the R&D tax credits that are available to the Group. There is some minor risk as to the timing and total amount of this cash flow, but the board has considered the availability of future funding, cost deferral and that existing shareholders have indicated their intention to provide further funding should this be required. That being said, major costs of drug development going forward are covered by external non-dilutive funding (collaborative research agreements and grants).

The Group believes that these available resources will be sufficient to meet its cash requirements through to the clinical trial, for its operational, portfolio expansion through strategic acquisitions and investments in entities engaged in immunotherapy and research and development activities.

As the Group continues to incur losses, transition to profitability is dependent upon achieving a level of revenues adequate to support the Group's cost structure and unless, and until doing so, intends to fund future operations through additional debt or equity offerings. There can be no assurance, however, that additional funding will be available on terms acceptable to the Group, if at all.

The Directors therefore consider it appropriate to prepare the financial statements on a going concern basis.

Payment of suppliers

It is the Group's policy that payments to suppliers are made in accordance with terms and conditions agreed between the Group and its suppliers. The average payment period for creditors for the year was 40 days (2015: 31 days).

Post balance sheet events

Events after the balance sheet date have been disclosed in note 27 to the financial statements.

Statement as to disclosure of information to the auditor

Each Director in office at the date of this report has confirmed, as far as he is aware, that there is no relevant audit information of which the auditor is unaware. Each such Director has confirmed that he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that information.

Auditor

A resolution to reappoint RSM UK Audit LLP as auditor, at a fee to be agreed, will be proposed by the Board.

The Directors' Report was approved by the Board of Directors and signed on its behalf by:

Kam Shah

Director

29 June 2017

Corporate Governance Statement

The Directors recognise the importance of the Financial Reporting Council's UK Corporate Governance Code (compliance with which is not mandatory for companies admitted to trading on AIM) and intend to comply with its principles so far as is practicable and appropriate given the nature and size of the Company and the size and constitution of the Board. The Directors also intend to comply with the principles of the Corporate Governance Guidelines for AIM Companies published by the Quoted Companies Alliance in 2010, to the extent that they consider it appropriate and having regard to the Company's size, board structure, stage of development and resources.

The Directors hold regular board meetings and are responsible for formulating, reviewing and approving the Company's strategy, budget and major items of capital expenditure. An audit committee, a remuneration committee and a nomination committee are in place with formally delegated rules and responsibilities. Each of these committees meets as and when appropriate save in the case of the remuneration and audit committees which meet at least twice each year.

The Audit Committee comprises Richard Armstrong (Chairman), Jim Mellon and Dr Greg Bailey. The Audit Committee, inter alia, determines and examines matters relating to the financial affairs of the Company including the terms of engagement of the Company's auditors and, in consultation with the auditor, the scope of the audit. It receives and reviews reports from management and the Company's auditors relating to the half yearly and audited annual accounts and the accounting and the internal control systems in use throughout the Enlarged Group.

The Remuneration Committee comprises Jim Mellon (Chairman), Richard Armstrong, Dr Greg Bailey and Colin Weinberg. The Remuneration Committee reviews and makes recommendations in respect of the Directors' remuneration and benefits packages, including share options and the terms of their appointment. The Remuneration Committee also make recommendations to the Board concerning the allocation of Options under the Plan.

The Nomination Committee comprises Colin Weinberg (Chairman), Jim Mellon and Richard Armstrong. The Nomination Committee monitors the size and composition of the Board and the other Board committees and is responsible for identifying suitable candidates for Board membership.

Statement of Directors' Responsibilities

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group financial statements in accordance with generally accepted accounting principles. The directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU").

The financial statements of the group are required by law to give a true and fair view of the state of the group's affairs at the end of the financial year end and of the profit or loss of the group for that period and are required by IFRS as adopted by the EU to present fairly the financial position of the group and the financial performance of the group.

In preparing the statements, the directors should:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRS adopted by the EU; and

· prepare the financial statements on a going concern basis unless it is inappropriate to presume that the group will continue in business.

The directors are responsible for keeping reliable accounting records which correctly explain the group's transactions and enable them to determine, with reasonable accuracy, the financial position of the group at any time and allow financial statements to be prepared. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the SalvaRx Group PLC website. Legislation in Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

SALVARX GROUP PLC

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SALVARX GROUP PLC

Opinion on financial statements

We have audited the group financial statements ("the financial statements") which comprise the Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion, the financial statements:

· give a true and fair view of the state of the Group's affairs as at 31 December 2016 and of the Group's loss for the year then ended;

· have been properly prepared in accordance with IFRSs as adopted by the European Union; and

· have been properly prepared in accordance with the requirements of the Isle of Man Companies Act 2006.

Other matter

Due to the application of reverse acquisition accounting (as explained in note 3), the consolidated comparative figures are unaudited.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements arising from the requirements of International Standards on Auditing (UK and Ireland) is provided on the Financial Reporting Council's website at http://www.frc.org.uk/auditscopeukprivate

Respective responsibilities of directors and auditor

As more fully explained in the Directors' Responsibilities Statement set out on page 13, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

We read the other financial and non-financial information contained in the annual report and consider the implications for our report if we become aware of any material inconsistency with the financial statements or with knowledge acquired by us in the course of performing the audit, or any material misstatement of fact within the other information. We also read the information in the directors' report and consider the implications for our report if we become aware of any material inconsistency with the financial statements.

This report is made solely in accordance with section 80C of the Isle of Man Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

MICHAEL THORNTON (Senior Statutory Auditor)

For and on behalf of RSM UK AUDIT LLP, Statutory Auditor

Chartered Accountants

2 Whitehall Quay

Leeds

LS1 4HG

29 June 2017

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

* In accordance with note 3, and the adoption of reserve takeover accounting principles, comparatives are for the consolidated results of SalvaRx Limited

*In accordance with note 3, and the adoption of reverse takeover accounting principles, comparatives are for the consolidated financial position of SalvaRx Limited.

The financial statements of SalvaRX Group plc were approved by the Board of Directors and authorised for issue on 29 June 2017. They were signed on its behalf by:

Kam Shah

Chief Financial Officer

Notes 1 to 27 form part of these financial statements.

*In accordance with note 3, and the adoption of reverse takeover accounting principles, comparatives are for the consolidated cash flows of SalvaRx Limited.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2016

Equity attributable to equity holders of the parent

Equity attributable to equity holders of the parent

Notes to the consolidated financial statements

For the year ended 31 December 2016

1 General information

SalvaRx Group PLC (the 'Company' and, together with its subsidiaries, the 'Group') is incorporated in the Isle of Man, British Isles under the Isle of Man Companies Act 2006. The address of the registered office is Commerce House, 1 Bowring Road, Ramsey, Isle of Man, British Isles, IM8 2LQ.

On 22 March 2016, the Company acquired the 88.9% of the share capital of SalvaRx Limited not already owned by it for a consideration of £8.8m satisfied by the issue of 24,788,732 New Ordinary Shares. The Acquisition was of sufficient size to constitute a reverse takeover under the AIM Rules and is accounted for as a reverse acquisition in these financial statements (note 3). As a result, SalvaRx Limited is an accounting acquirer and comparative figures provided in these financial statements are those of SalvaRx Limited.

In conjunction with the above, the name of the Company was changed to SalvaRx Group PLC, the shares were consolidated on the basis of 1 new Ordinary Share for every 100 Ordinary Shares, and there was a placing of 5,492,958 new Ordinary Shares at a price of 35.5p per share to raise £1.95m before expenses.

The principal activity of the Group is drug development, pre-clinical development with particular focus on developing series of compounds for cancer immunotherapy.

These financial statements are presented in pounds sterling, which is the Group's functional and presentational currency, and all values are rounded to the nearest thousands (£'000) except loss per ordinary share and certain figures in the notes.

2 Adoption of new and revised Standards

For the preparation of these consolidated financial statements, the following new or amended standards are mandatory for the first time for the financial year beginning 1 January 2016:

· Amendments to IAS 1 titled Disclosure Initiative (issued in December 2014) - The amendments, applicable to annual periods beginning on or after 1 January 2016, clarify guidance on materiality and aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies. The amendments had no material effect on the Group's consolidated financial statements.

· Amendments to IAS 27 titled Equity Method in Separate Financial Statements (issued in August 2014) - The amendments, applicable to annual periods beginning on or after 1 January 2016, reinstate the equity method option allowing entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. This amendment has no effect on consolidated financial statements.

· Amendment to IFRS 5 (Annual Improvements to IFRSs 2012-2014 Cycle, issued in September 2014) - The amendment, applicable prospectively to annual periods beginning on or after 1 January 2016, adds specific guidance when an entity reclassifies an asset (or a disposal group) from held for sale to held for distribution to owners, or vice versa, and for cases where held-for-distribution accounting is discontinued. This amendment had no effect on the Group's consolidated financial statements.

· Amendment to IFRS 7 (Annual Improvements to IFRSs 2012-2014 Cycle, issued in September 2014) - The amendment, applicable to annual periods beginning on or after 1 January 2016, adds guidance to clarify whether a servicing contract is continuing involvement in a transferred asset. The amendment had no effect on the Group's consolidated financial statements.

2 Adoption of new and revised Standards (continued)

· Amendments to IFRS 10, IFRS 12 and IAS 28 titled Investment Entities: Applying the Consolidation Exception (issued in December 2014) - The amendments, applicable to annual periods beginning on or after 1 January 2016, clarify the application of the consolidation exception for investment entities and their subsidiaries. The amendments had no effect on the Group's consolidated financial statements.

At the date of authorisation of the financial statements, the following Standards and Interpretations which have not been applied in the financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

· Amendments to IAS 7 titled Disclosure Initiative (issued in January 2016) - The amendments, applicable to annual periods beginning on or after 1 January 2017.

· Amendments to IAS 12 titled Recognition of Deferred Tax Assets for Unrealised Losses (issued in January 2016) - The amendments, applicable to annual periods beginning on or after 1 January 2017.

· Amendments to IFRS 2 titled Classification and Measurement of Share-based Payment Transactions (issued in June 2016) - The amendments, applicable to annual periods beginning on or after 1 January 2018.

· IFRS 9 Financial Instruments (issued in July 2014) - This standard will replace IAS 39 (and all the previous versions of IFRS 9) effective for annual periods beginning on or after 1 January 2018.

· Amendments to IFRS 10 and IAS 28 titled Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (issued in September 2014). The effective date of the amendments, initially set for annual periods beginning on or after 1 January 2016, is now deferred indefinitely but earlier application is still permitted.

· IFRS 15 Revenue from Contracts with Customers (issued in May 2014 and amended for clarifications in April 2016) -The new standard, effective for annual periods beginning on or after 1 January 2018, replaces IAS 11, IAS 18 and their interpretations.

· IFRS 16 Leases (issued in January 2016) - The new standard, effective for annual periods beginning on or after1 January 2019, replaces IAS 17 and its interpretations.

The Directors do not expect that the adoption of these Standards or Interpretations in future periods will have a material impact on the financial statements of the Group.

3 Reverse acquisition transaction

On 30 September 2015, the Company acquired 11.14% of the issued share capital of SalvaRx Limited ("SalvaRx"), a private company incorporated in the British Virgin Islands.

On 22 March 2016, the Company acquired the remaining issued share capital of SalvaRx by issuing 24,788,732 ordinary shares of the Company.

Although the transaction resulted in SalvaRx becoming a wholly owned subsidiary of the Company, the transaction constitutes a reverse acquisition in as much as the shareholders of SalvaRx own a substantial majority of the outstanding ordinary shares of the Company and four out of six members of the Board of Directors of the Company are SalvaRx shareholders and management.

In substance, the shareholders of SalvaRx acquired a controlling interest in the Company and the transaction has therefore been accounted for as a reverse acquisition in accordance with guidance provided in IFRS 2 Share-based payment and IFRS 3 Business Combinations. As the Company previously discontinued its investment activities and was engaged in acquiring SalvaRx and raising equity financing to provide the required funding for the operations of the proposed acquisition and re-listing on AIM, it did not meet the definition of a business according to the definition in IFRS 3. Accordingly, this reverse acquisition does not constitute a business combination and in accordance with IFRIC guidance the difference between the equity value given up by the SalvaRx shareholders and the share of the fair value of net assets gained by the SalvaRx shareholders is charged to the statement of comprehensive income representing the cost of acquiring an AIM quoted listing.

In accordance with reverse acquisition accounting principles, these consolidated financial statements represent a continuation of the consolidated financial statements of SalvaRx and include:

a. The assets and liabilities of SalvaRx and iOx Therapeutics Limited (its 60.49% owned subsidiary acquired on 24 June 2015) ("iOx") at their pre-acquisition carrying amounts and their results for both periods; and

b. The assets and liabilities of the Company as at 31 December 2016 and it's results from 23 March 2016 to 31 December 2016,

The fair value of net assets of the Company acquired by SalvaRx was as follows:

The deemed cost of the acquisition represents the difference between the fair value of the shareholding given up by SalvaRx Limited shareholders and the share of the fair value of the assets and liabilities of the Company gained by those shareholders. Whilst the deemed cost of acquisition is recorded in equity, the share capital and share premium must reflect that of the Company and therefore the difference arising is recorded in the reverse acquisition reserve (note 23).

Consequently, based on an assessment of the purchase consideration for an 88.9% holding in SalvaRx of £8.8m, the deemed cost of the acquisition of the Company by SalvaRx is £2,832,000. The difference between this deemed cost and the fair value of the net assets acquired (above) of £563,000 has been expensed in accordance with IFRS 2, Share based payments, reflecting the economic cost to the SalvaRx shareholders of acquiring a quoted entity. Given its significance, this cost has been treated as an exceptional item (note 7).

At the point of acquisition, the net assets of the company included a £215,000 investment in SalvaRx Limited. As SalvaRx Limited is the acquirer under reverse accounting principles, this investment has been treated as a purchase of own shares and recorded in equity (note 21).

4 Summary of significant accounting policies

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union ("EU"), and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.

The financial statements have been prepared on the historical cost convention basis except for the revaluation of certain financial instruments. Historic cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies adopted are set out below.

Going concern

The Group's business activities, together with the factors likely to affect its future development and position, are set out in the Directors' Report.

The consolidated financial statements of the group have been prepared on a basis which assumes that the Group will continue as a going concern, which contemplates the realisation of assets and satisfaction of liabilities and commitments in the normal course of business.

At 31 December 2016, the Group had cash and cash equivalent of approximately £1.0 million. Subsequent to the balance sheet date, the Group's subsidiary, SalvaRx Limited raised approximately £2.4 million (US$3.0 million) through debt financing.

The Board has evaluated the cash flow and proposed budget and has reached the conclusion there is sufficient funding for the current workload projected until June 2018. This budget includes some estimation of the R&D tax credits that are available to the Group. There is some minor risk to the timing and total amount of this cash flow, but the board has considered the availability of future funding, cost deferral and that existing shareholders have indicated their intention to provide further funding should this be required. That being said, major costs of drug development going forward are covered by external non-dilutive funding (collaborative research agreements and grants).

The Group believes that these available resources will be sufficient to meet its cash requirements through to the clinical trial, for its operational, portfolio expansion through strategic acquisitions and investments in entities engaged in immunotherapy and research and development activities.

As the Group continues to incur losses, transition to profitability is dependent upon achieving a level of revenues adequate to support the Group's cost structure and unless and until doing so, intends to fund future operations through additional debt or equity offerings. There can be no assurance, however, that additional funding will be available on terms acceptable to the Group, if at all.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

These consolidated financial statements include the accounts of the Company and:

i. SalvaRx Limited, ("SalvaRx") incorporated on 6 May 2015 in the British Virgin Islands. SalvaRx is a wholly owned subsidiary of the Company.

ii iOx Therapeutics Limited ("iOx") incorporated in the U.K. as a private company (Company Number 9430782) under the Companies Act 2006 on 10 February, 2015. SalvaRx holds 60.49% equity in iOx.

These consolidated financial statements have been prepared using reverse acquisition, as detailed in note 3.

Significant accounting policies

Research and Development Expenses

(i) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to, and has sufficient resources to, complete development and to use or sell the asset. No development costs have been capitalised to date.

Research and development expenses include all direct and indirect operating expenses supporting the products in development

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized in profit or loss as incurred.

(iii) Clinical trial expenses

Clinical trial expenses are a component of the Company's research and development costs. These expenses include fees paid to contract research organizations, clinical sites, and other organizations who conduct development activities on the Company's behalf. The amount of clinical trial expenses recognized in a period related to clinical agreements are based on estimates of the work performed using an accrual basis of accounting. These estimates incorporate factors such as patient enrolment, services provided, contractual terms, and prior experience with similar contracts.

(iv) Government grants

Government grants relate to financial grants from governments, public authorities, and similar local, national or international bodies. These are recognised when there is a reasonable assurance that the Company will comply with the conditions attaching to them, and that the grant will be received. Government grants relating to research and development are off-set against the relevant costs.

Business Combinations

The Company applies the acquisition method to account for all acquired businesses, whereby the identifiable assets acquired and the liabilities assumed are measured at their acquisition-date fair values (with few exceptions as required by IFRS 3 Business Combinations).

The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Company.

Acquisition-related costs (e.g. finder's fees, consulting fees, administrative costs) are recognized as expenses in the periods in which the costs are incurred and the services are received. On acquisition date, goodwill is measured as the excess of the aggregate of consideration transferred, any non-controlling interests in the acquiree, and acquisition-date fair value of the Company's previously held equity interest in the acquiree (if business combination achieved in stages) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

If, after appropriate reassessment, the amount as calculated above is negative, it is recognized immediately in profit or loss as a bargain purchase gain.

At acquisition date, non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation are measured at either fair value or the present ownership instruments' proportionate share in the recognized amounts of the acquiree's identifiable net assets. This choice of measurement is made separately for each business combination. Other components of non-controlling interests are measured at their acquisition-date fair values, unless otherwise required by IFRS.

The acquisition-date fair value of any contingent consideration is recognised as part of the consideration transferred by the Company in exchange for the acquiree. Changes in the fair value of contingent consideration that result from additional information obtained during the measurement period (maximum one year from the acquisition date) about facts and circumstances that existed at the acquisition date are adjusted retrospectively against goodwill.

Intangible Assets Acquired in business combinations

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment loses, on the same basis as intangible assets that are acquired separately.

Foreign currencies

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pound sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the functional currency of each Group company ("foreign currencies") are recorded in the functional currency at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated into the functional currency at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interest as appropriate).

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill, or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes party to the contractual provisions of the instrument.

The Group derecognises a financial asset only when the contractual rights to cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for the amount it may have to pay.

The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or expired.

Financial assets

a) Investments - Available for sale financial assets

AFS financial assets are non-derivatives that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. The Group's AFS investment does not have a quoted market price in an active market and the Directors are of the opinion that fair value cannot be reliably be measured. The investment is therefore measured at cost, less any identified impairment loss.

b) Loans and receivables

Trade and other receivables

Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost less any provision for impairment.

Cash and cash equivalents comprise cash in hand and on-demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash with three months or less remaining to maturity and are subject to an insignificant risk of changes in value.

Financial liabilities

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Convertible loan notes

The component parts of compound instruments (convertible loan notes) issued by the Group are classified separately between the loan and equity option elements. The Group has one convertible loan note in issue which is denominated in a currency different to the currency of the equity option and accordingly at inception the equity option is treated as an embedded derivative and recorded at fair value as a financial liability (the "equity option") and the fair value of the instrument as a whole less the value of the equity option is recorded as a financial liability

(the "loan element"). At subsequent balance sheet dates the fair value of the equity option is remeasured with movements in fair value being recorded in the income statement. The loan element is recorded at amortised cost and is subject to a notional interest charge in each reporting period which is recorded in the income statement.

Share-based payments

The Group has applied the requirements of IFRS 2 Share-based Payment for all grants of equity instruments.

The Group operates an equity-settled share option plan to certain shareholders. The fair value of the service received in exchange for the grant of options and warrants is recognised as an expense. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of equity-settled share-based payment is expensed on a graded vesting basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions. 

Fair value is measured by use of the Black-Scholes model. The expected life used in the models has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments and making strategic decision, has been identified as the Board of Directors.

5 Critical accounting judgements and key sources of estimation and uncertainty

In the application of the Group's accounting policies, which are described in note 4, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both the current and future periods.

The following are the critical judgements and estimations that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements:

Convertible loan notes (note 17)

The convertible notes have an embedded derivative in the form of equity conversion rights. The fair value of derivatives is determined by using appropriate valuation techniques and inputs to the model. The Group has determined that it is appropriate to use the Black-Scholes mode for this option given that the instrument has been converted after the year end on 2 March 2017. The key assumptions made in drawing this conclusion relate to foreign exchange and time to exercise. Further details are set out in note 17.

Share-based payments

The Group has an equity-settled share option scheme available to certain Directors and consultants. In accordance with IFRS 2 Share-based payment, in determining the fair value of options granted, the Group has applied the Black-Scholes model. As a result, the Group makes assumptions for expected volatility and expected life. The fair value of options granted in the years reported is shown in note 24.

6 Business and geographical segments

Throughout the year, the Directors consider there to be only one business and operating segment from continuing operations, namely research and development.

The Group has no revenue and therefore no geographical analysis is presented.

8 Operating loss

9 Auditor's remuneration

Amounts payable to RSM UK Audit LLP and its associates in respect of both audit and non-audit services:

10 Staff costs

Details of shares and options held by the Directors are disclosed in the Directors' report.

11 Tax

The tax credit for the year of £31,000 (2015: £15,000) relates entirely to the release of deferred tax liabilities in respect of intangible assets.

The tax assessed for the year is at the standard rate of corporation tax in the Isle of Man of 0% (2015: 0%) and is calculated as follows:

The Company's subsidiary, iOX Therapeutics ltd ("IOX") is subject to tax in the UK. There is no tax charge for the reporting periods due to losses.

IOX has potential research and development cash credits of approximately £244,000 consisting of £53,000 for 2015 and £191,000 for 2016. The credits will be recognised when they are accepted by the UK tax authorities, given that these are the first claims made by the company.

Deferred Taxation

As at 31 December 2016, iOx tax losses were approximately £1,045,000 (2015: £54,000). Tax losses will be carried forward and are potentially available for utilisation against taxable profits in future years. The Group has not recognised a deferred tax asset in respect of these tax losses as there is insufficient evidence of suitable future profit being available against which these losses can be offset. The asset will be recognised in future periods when its recovery (against appropriate taxable profits) is considered probable.

At 31 December 2016 the Group had a deferred tax liability of £201,000 (2015: £232,000) recognised in respect of intangible assets arising on the acquisition of iOx. The intangible asset relates to in process research residing in the UK and therefore deferred tax has been recorded at 17% being the rate applicable in that country. The Group has no other provided or unprovided deferred tax liabilities. The reduction in the liability in the year of £31,000 (2015: £15,000) has been recorded in full in the income statement

12 Loss per Ordinary Share

Basic loss per Ordinary Share is calculated by dividing the net loss for the year attributable to Ordinary equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the year. The calculation of the basic and diluted loss per Ordinary Share is based on the following data:

The weighted average number of shares is adjusted for the impact of the reverse acquisition as follows:

· Prior to the reverse takeover, the number of shares is based on SalvaRx Limited, adjusted using the share exchange ratio arising on the reverse takeover; and

· From the date of the reverse takeover, the number of share is based on the Company.

Dilutive loss per Ordinary Share equals basic loss per Ordinary Share as, due to the losses incurred in 2016 and 2015, there is no dilutive effect from the subsisting share options.

13 Investments

(i) On 22 April 2016, the Company acquired 1 million Series A preferred stock in Intensity Therapeutics Inc., a Delaware corporation ("Intensity") for US$2m in cash. All Series A Preferred stock is convertible into equal number of common shares in Intensity. The Company's holdings represent less than 10% of the equity of Intensity.

13 Investments (continued)

(ii) On 13 December 2016, SalvaRx Limited, a wholly owned subsidiary of the Company, invested US$45,000 in cash in convertible promissory note issued by Rift Biotherapeutics Inc., a Delaware corporation ("Rift"). The Note carries interest at 5% and matures on the earliest of 31 December 2017 and a change in control at Rift. SalvaRx Limited made further investments into Rift subsequent to the balance sheet date and agreed to convert into equity in Rift as explained in note 27(a).

As at 31 December 2016, the Company has determined that there was no evidence of any impairment in the carrying value of investments and as a result no adjustment was considered necessary in its carrying value.

14 Intangible assets

On 1 July 2015, SalvaRx acquired 15,313 new Seed Preferred Shares in iOx at a price of £120 per Seed Preferred Share, which represents 60.49 %. equity in iOx for £1,837,560. 

Except for a preference over Ordinary Shares on winding up, Seed Preferred Shares have the same voting rights as Ordinary Shares and are convertible into equal number of ordinary shares.

SalvaRx has a majority equity interest and also has significant control over the management of iOx. As a result, management have concluded that iOx is a subsidiary undertaking and these financial statements include results of operations for iOx for the year ended 31 December 2016 and assets and liabilities as at 31 December 2016 and comparative figures include results of operations for IOX from 1 July 2015 to 31 December 2015 and assets and liabilities as at December 2015.

14 Intangible assets (continued)

The non-controlling interest in iOx on the date of acquisition was valued at £1.2 million, based on their 39.51% equity being valued on the basis of the price SalvaRx paid for 60.49% equity in iOx. As at 1 July 2015, net assets acquired were determined as per IFRS 3 - business combinations, as follows:

* Consideration was paid for new Seed Preferred Shares in iOx. As SalvaRx has control over iOx and the consideration paid by

SalvaRx will remain within the Group, the net cash impact of the acquisition on the Group is £nil.

** Non-controlling interest has been valued based on 39.51 per cent. of the grossed up consideration paid by SalvaRx ((£1,837,560 /60.49 per cent.) x 39.51 per cent.)

As part of this business combination, and also on 1 July 2015, iOx Therapeutics Limited ("iOx") entered into an Investment Agreement with The University of Oxford, ISIS, the Ludwig Institute, SalvaRx Limited and Professor Cerundolo. As part of this agreement, iOx also entered into a Clinical Trials Sponsorship agreement with The University of Oxford and also entered into a licence agreement with the Ludwig Institute to access intellectual property rights and know-how relating to cell agonists. Accordingly, the Directors have determined that the excess of consideration over identifiable assets and liabilities relates entirely to an in-process research intangible asset.

The intangible asset thus arising is being amortised over 8 years, being the Directors assessment of the period over which the technologies are likely to be developed and at the end of which commercial products will hopefully be available for sale. The remaining life of the intangible asset is 6.5 years. Given that the progress of iOx is satisfactory, there is no indication of impairment.

15 Trade and other receivables

16 Cash and cash equivalents

Cash and cash equivalents as at 31 December 2016 of approximately £1.0 million (As at 31 December 2015 (unaudited): £0.6 million) comprise cash held by the Group.

17 Convertible Loan Notes

On 21 April 2016, the Company issued US$1 million of zero coupon convertible unsecured loan notes ("Loan Notes") to Jim Mellon, the Non-Executive Chairman and Greg Bailey, a Non-Executive Director ("the Noteholders"), who are both substantial shareholders in the Company. Mr Mellon and Dr Bailey subscribed for US$0.5 million of Loan Notes each. The Loan Notes have a term of three years, with a zero coupon and may be converted in whole or in part at the Noteholder's discretion at a price of 35.5p per ordinary share. The Noteholders have undertaken not to convert their Loan Notes in circumstances where (i) the conversion would result in the Concert Party's holding in the Company exceeding 74.66% on a fully diluted basis or (ii) the percentage of shares in public hands would fall below 10%.

On 2 March 2017, The Note liability was transferred to SalvaRx Limited and the note holders agreed to accept 4,000 shares of SalvaRx Limited at a price of $250 per share in settlement of the loan notes, which would give them 5.85% equity in SalvaRx Limited.

The recognition of this investment, and the movements to the balance sheet date, can be summarised as follows:

These notes have an embedded derivative in the form of the equity conversion rights whose value was defined due to the conversion into SalvaRx Limited shares subsequent to the balance sheet date as explained above. The fair value of the derivative has been estimated using a Black-Scholes pricing model with the following assumptions:

The Company has therefore determined the fair value of the derivative at the balance sheet date to be £78,094. The difference in derivative value from the previous value of £211,267 at the date of inception has been credited to the income statement as a financing cost.

The Directors have valued the option using the Black Scholes model. In determining the valuation the Directors have assumed:

· An option life consistent with the actual exercise date of 2 March 2017 reflecting their original assessment of time to exercise, and

· Spot FX rate at both measurement date. In making this assumption, the Directors have considered the impact on the valuation of a reasonable range of possible exchange rates and noted that the impact on valuation is reasonably small.

The value of the option at issue has been deducted from the overall fair value of the convertible loan note and is accounted for separately on the balance sheet. It will be subject to revaluation on each balance sheet date through the income statement in accordance with IAS 39.

The residual loan balance of £484,000 at inception is held at amortised cost and is subject to a notional interest at 12.83%, which for the year to 31 December 2016 was £46,000. The interest amount is expensed as finance cost and included within the loan balance. The loan balance is subject to revaluation at the spot exchange rate.

18 Trade and other payables

Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going costs. The average credit period taken for trade purchases is 40 days (2015: 31 days). The Group has financial risk management policies to ensure that all payables are paid within the credit timeframe.

The Directors consider that the carrying amount of trade and other payables approximates to their fair value. No interest is generally charged on balances outstanding.

19 Financial instruments

Capital risk management

The Group manages its capital resources so as to ensure that entities in the Group will be able to continue as a going concern, while maximising the return to shareholders. Until it achieves positive cash-flow, the Group expects to fund its operations through a combination of equity capital raised from the market and, where appropriate, debt finance.

The capital resources of the Group consist of cash and cash equivalents arising from equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity.

Externally imposed capital requirement

The Group is not subject to externally imposed capital requirements.

Categories of financial instruments

Financial risk management objectives

Management provides services to the business, co-ordinates access to domestic and international financial markets, and monitors and manages the financial risks relating to the operations of the Group. These risks include foreign currency risk, credit risk and liquidity risk. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes and any currency hedging transactions.

In order to effectively manage these risks, the Board of Directors has approved strategies for the management of financial risks, which are in line with corporate objectives. These strategies set up guidelines for the short term and long term objectives and action to be taken in order to manage the financial risks that the Group faces.

The major guidelines are the following:

· Maximise the use of "natural hedge" favouring as much as possible the natural off-setting of costs, payables and receivables denominated in the same currency.

· All financial risk management activities are carried out and monitored central level and discussed at Board level.

· The Group will not invest temporary excess liquidity in shares or similar instruments unless authorised by the Board of Directors.

Foreign exchange risk and foreign currency risk managementThe Group is exposed to currency risk since its main source of funding is in British pounds while a significant part of its expenses are in US dollars. While the Group aims to minimise exposure to foreign exchange risk by matching the currency of income and related expenditure flows where possible, fluctuations in the exchange rate between these two currencies can have significant effect.

Sensitivity analysis

A 10% increase/decrease in exchange rate of the British Pound against the USD would reduce/increase the loss after tax by £67,300.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Group. The Group has minimal trade and other receivables at the year end.

The Group makes allowances for impairment of receivables where there is an identified event which, based on previous experience, is evidence of a reduction in the recoverability of cash flows.

The credit risk on liquid funds (cash) is considered to be limited because the counterparties are financial institutions with good credit ratings assigned by international credit-rating agencies. The carrying amount of financial assets recorded in the financial statements represents the Group's maximum exposure to credit risk.

There are no significant concentrations of credit risk.

The credit risk arising in respect of investments is inevitably higher risk. The nature of the Group's business is developing innovative solutions for the treatment of cancer and there is no guarantee that any individual investment will be successful. This risk is partly mitigated through representation on its Board of Directors and the Group's CEO monitors its progress on a regular basis.

The maximum credit risk to which the Group is exposed is summarised in the following table.

As explained in note 16, cash and cash equivalents balances represent bank balances.

The Group does not hold collateral for any of its receivables.

There were no past due receivables.

Investments are in the form of equity investment in private companies in which the Group is represented on its Board of Directors and the Group's CEO monitors its progress on a regular basis.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecast and actual cash flows.

All financial liabilities held by the Group are non-interest bearing.

The following tables analyse financial liabilities by remaining contractual maturity.

With the exception of the convertible loan note, the Group expects to pay all liabilities at their contractual maturity. As described in note 27(c), the convertible loan note was converted into equity shortly after the year end.

However, as a biotech company at an early stage of development and without significant internally generated cash flows, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company, or that actual drug development expenditures may exceed those planned. The current uncertainty in global markets could have an impact on the Company's future ability to access capital on terms that are acceptable to the Company. There can be no assurance that required financing will be available to the Company. 

20 Share capital

The Company has one class of Ordinary Shares, which carry no right to fixed income.

Movements during the year:

In March 2016, the Company completed a share consolidation on the basis of 1 new Ordinary Share for every 100 Ordinary Shares.

In March 2016, the Company raised approximately £1.9 million before expenses in a private placement involving issuance of 5,492,958 ordinary shares at a price of 35.5p per share.